After a year of low oil prices, only 0.1% of global production has been curtailed because it is unprofitable, according to a report from consultants Wood Mackenzie Ltd. that highlights the industry’s resilience.
The analysis, published ahead of an annual oil industry gathering in London next week, suggests that oil prices will need to drop even more, or stay low for a lot longer to meaningfully reduce global production, Bloomberg reported.
The Wood Mackenzie analysis provides an estimate for the amount directly impacted by low prices–to the tune of 100,000 barrels a day since the beginning of 2015–rather than output affected as new projects build up and aging fields decline. Canada, the US and the North Sea have been affected the most by closures related to low prices.
“Since the drop in oil prices last year, there have been relatively few production shut-ins,” according to the report.
The company, which tracks production and costs at more than 2,000 oilfields worldwide, estimates that another 3.4 million barrels a day of production are losing money at current prices, of about $35 a barrel.
It cautioned against expecting further closures, because “many producers will continue to take the loss in the hope of a rebound in prices”.
In addition, for major oil companies, a few months of losses may make more sense than paying to dismantle an offshore platform in the North Sea, or stopping and restarting a tar-sands project in Canada, which may take months and cost millions of dollars.
“There are barriers to exit,” said Robert Plummer, vice president of investment research at Wood Mackenzie.
